CACI International Inc

NYSE:CACI

Earnings Call Analysis

Fiscal 2025 Starts Strong

CACI International's earnings call for the first quarter of fiscal 2025 showcased robust growth indicators. The company reported nearly $2.1 billion in revenue, marking an impressive 11.2% increase year-over-year, which includes a solid 9.9% organic growth and additional contributions from three recent acquisitions. Moreover, CACI's EBITDA margins improved to 10.5%, a notable 110 basis points increase compared to the prior year. This strong performance resulted in an adjusted diluted earnings per share of $5.93, reflecting a remarkable 36% year-on-year growth.

Acquisitions Enhance Growth Strategy

During this period, CACI successfully executed purchases for two strategic acquisitions: Applied Insight and Azure Summit. These acquisitions are expected to bolster CACI’s capabilities in cloud migration, AI, and electromagnetic spectrum technologies while enhancing customer access. The completion of these deals is projected to positively impact EBITDA margin and free cash flow from the first year itself. Post these transactions, CACI anticipates a pro forma leverage of 3.2x, emphasizing their capacity to manage debt effectively and return to target leverage swiftly.

Upsized Guidance for Fiscal 2025

Due to sustained momentum from organic growth and the strategic acquisitions, CACI has raised its revenue guidance for fiscal 2025 to a range between $8.1 billion and $8.3 billion. This increase includes $75 million attributed to organic performance, signaling a projected underlying growth of 8.6% to 11.3%. Furthermore, the company anticipates an EBITDA margin toward the higher end of the previously communicated range in the upper tens, bolstered by contributions from new acquisitions.

Strong Backlog Reflects Award Success

CACI enjoyed a successful quarter of business development, winning over $3.3 billion in contract awards, resulting in a compelling book-to-bill ratio of 1.6 for the quarter and 1.8 for the trailing twelve months. Impressively, approximately 75% of these awards are attributed to new contracts, demonstrating CACI’s ability to acquire new business in a competitive market. The company currently holds a record backlog of $32.4 billion, up 21% from the previous year, which provides reassurance about sustainable revenue over the next several years.

Cash Flow and Working Capital Management

CACI's operating cash flow for the quarter stood at $61 million, reflecting robust cash collections despite some work capital adjustments. The company reported free cash flow of $49 million, aligning with expectations. However, increased working capital demands are anticipated due to the nature of new contracts and growth in areas that typically require higher working capital.

Market Conditions and Outlook

Looking ahead, CACI remains optimistic about its prospects. The firm prepares for potential implications from the U.S. government’s budget cycles, noting that current geopolitical conditions are fostering demand for national security solutions. Despite possible fluctuations in timing due to budget resolutions, demand for CACI’s software-defined technologies remains strong and is projected to persist.

Future Guidance and Investor Insight

As a consequence of the updated revenue outlook and robust business fundamentals, CACI has increased adjusted net income guidance to between $515 million and $535 million, leading to a projected adjusted EPS between $22.89 and $23.78. CACI’s commitment to strategic acquisitions and their focus on delivering differentiated technologies set a promising stage for continued growth and increased shareholder value.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the CACI International Fiscal 2025 First Quarter Conference Call. Today's call is being recorded. [Operator Instructions] At this time, all lines are in a listen-only mode. Later, we will announce the opportunity for questions, and instructions will be given at that time. [Operator Instructions] At this time, I'd like to turn the conference call over to George Price, Senior Vice President, Investor Relations. Please go ahead, sir.

Thanks, Mandeep, and good morning, everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International, and thank you for joining us this morning. We are providing presentation slides, so let's move to Slide 2.

There will be statements in this call that do not address historical fact and as such constitute forward-looking statements under current law. These statements reflect our views as of today and are subject to important factors that could cause our actual results to differ materially from anticipated. Those factors are listed at the bottom of last night's press release and are described in the company's SEC filings. Our safe harbor statement is included on this exhibit and should be incorporated as any part -- as part of any transcript of this call. I would also like to point out that our presentation will include discussion of non-GAAP financial measures. These should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Let's turn to Slide 3, please. To open our discussion this morning is John Mengucci, President and Chief Executive Officer of CACI International. John?

[John Mengucci, executive]

Thanks, George, and good morning, everyone. Thank you for joining us to discuss our first quarter fiscal year '25 results as well as our updated fiscal '25 guidance. With me this morning is Jeff MacLauchlan, our Chief Financial Officer. Let's go to Slide 4, please. Our first quarter results represent a great start to fiscal '25. We delivered revenue growth of 11%, EBITDA margin of 10.5% and solid free cash flow. In addition, we won over $3.3 billion of awards, which represents a 1.6x book-to-bill for the quarter and 1.8x on a trailing 12-month basis. First quarter awards were a strong follow-up to a record Q4 and nearly 75% of our awards this quarter were for new work to CACI. During the quarter, we also executed purchase agreements for 2 strategic acquisitions: Azure Summit technology and Applied Insight. Azure Summit remains on track to close during our second quarter, while Applied Insight closed earlier this month. Both our strong first quarter organic performance and the addition of Applied Insight enables us to raise our FY '25 guidance, and Jeff will provide the financial details shortly.

CACI continues to be well positioned to drive long-term growth and free cash flow per share and shareholder value, thanks to our exceptional business development function, our strong execution, our strategy of investing ahead of need and our flexible and opportunistic capital deployment.

Slide 5, please. Our $3.3 billion of awards represents another strong quarter of business development performance. Let me briefly highlight a couple of the wins this quarter. We were awarded 2 separate contracts with the U.S. Navy to provide engineering expertise and technology and focus on accelerating the implementation of new capabilities to the war fighter. First, the 5-year task order valued at up to $805 million with NavalX, the innovation arm of the Navy and U.S. Marine Corps to support the development and deployment of new technologies in areas such as artificial intelligence, command and control and cyber across their platforms and sensors.

Second, a 5-year task order, value will add up to $314 million with the Naval Undersea Warfare Center, to support fleet readiness, accelerate implementation of new technology and enhanced cyber resiliency for Undersea Warfare systems.

Slide 6, please. Our strong track record of awards is driven by our strategy to address critical and enduring national security priorities, invest ahead of need and differentiated capabilities, bid less and win more and focus on larger, longer duration programs. Equally importance of the long-term success of our business is superior execution after those contracts were won. Strong execution builds a track record of past performance, which together with the other elements of our strategy, create sustainable differentiation and enduring competitive advantage. Let me share a few examples of just how CACI is consistently executing at scale on our large programs. First, the Army's Integrated Personnel and Pay system, which is referred to as IPPS-Army, is the largest and most complex PeopleSoft implementation in history.

Since going live, the system has had over 1 million distinct users and supports more than 140,000 users per day. IPPS-Army for the first time, provides online integrated HR capabilities across the entire army and is recognized as the model agile program within the service. Next, Enterprise IT as a Service program with the Air Force, known as EITaaS, continues to scale. Our new IT service management system has been seamlessly deployed to replace their old system, and we are now supporting over 400,000 users exceeding the contract milestone by nearly 60% and tracking to over 600,000 users by the end of this calendar year.

And most importantly, customer feedback has been extremely positive on the value, the speed and the responsiveness that we are delivering. In addition, we've met all milestones on our recent network modernization awards, including DIA ECS3, Army SIPRMOD and Army GENMOD. CACI is designing and deploying faster, more secure, software-defined networks. They not only enhance efficiency and reduce cyber vulnerabilities, but are also critical enablers of customer priorities like JADC2 and AI. And finally, we recently began ramping up and executing on our NASA NCAPS contract. With this work underway, CCI is now executing the 3 largest agile software development programs in the U.S. government. We continue to see a healthy pipeline of additional opportunities as the government increasingly adopts agile methodologies.

Slide 7, please. I'm also pleased with the increasing demand we're seeing for our software-defined RF technology. CACI has the right capabilities to meet our customers' critical needs in the current geopolitical environment today because we began to invest ahead of -- over a decade ago. First, our spectral program for the Navy has successfully completed the design phase and has shifted to development and integration. This is a major milestone on our program critical to our country's national security strategy. The Navy's goal is to bring enhanced capabilities to the fleet faster and CACI is making that possible. Next, on our TLS Manpack program for the Army, we will begin deliveries against the previously announced $100 million IDIQ this quarter.

As a reminder, the TLS Manpack system allows dismounted soldiers to conduct signal detection, direction finding and electronic attack while on the move. CACI's technology enables the army to dominate the electromagnetic spectrum and increasingly critical domain on today's battlefield, and one where the U.S. is still in the early stages of modernization and investment.

Our technology can also address counter-UAS threats, a capability that was not previously available at the individual soldier level. We expect additional orders in FY '25 as these critical capabilities are in high demand by our customers. Through our strategy of focusing on differentiated software-defined technology, we are delivering speed and agility to our customers to address their most critical missions and increasingly setting CACI apart from a wide range of competitors.

Slide 8, please. We continue to execute on flexible and opportunistic capital deployment strategy where we evaluate M&A, share repurchases, debt repayment and other actions based on the dynamics we see at the time. Our M&A program focuses on filling gaps in our capabilities, our customer presence and past performance. And on this front, we recently announced 2 fantastic acquisitions. First, in September, we announced a definitive agreement to purchase Azure Summit. Azure Summit is a provider of innovative, high-performance RF technology and engineering focused on the electromagnetic spectrum. Strategically, they had established and complementary technology and expand our customer presence. Financially, Azure Summit will be accretive to CACI's EBITDA margin, adjusted EPS and free cash flow per share in the first year. And they have strong cultural alignment with CACI and bringing an exceptionally talented workforce.

In addition, and earlier this month, we completed the acquisition of Applied Insight, a company that fills gaps by enhancing our capabilities and customer presence around cloud migration and AI, particularly in the intelligence community. Applied Insight utilizes repeatable tools and technology that enable faster, more efficient cloud migration, particularly within classified cloud environments. They also have several existing contracts with intelligence community customers to provide AI and machine learning technology development.

And financially, they are similarly accretive to CACI in the first year, like Azure Summit.

Slide 9, please. We continue to monitor the government fiscal year '25 budget process closely. As for most years, Government fiscal year '25 began under a Continuing Resolution, which last through December 20. We've prepared for a number of scenarios, most of which we believe are addressed within our guidance range. We typically do not see a material impact from CRs though they can sometimes influence the quarter-to-quarter timing of shorter-cycle revenue like our software-defined technology deliveries. We continue to see customer demand being driven by geopolitical dynamics, the elevated global threat environment and the pacing capabilities of our adversaries. National security remains bipartisan, and budgets are healthy with an upward bias. CACI is well positioned in areas of enduring demand with deep, resilient funding streams.

With that, I'll turn the call over to Jeff.

[Jeffrey MacLauchlan, executive]

Thank you, John. Good morning, everyone. Please turn to Slide 10. In the first quarter, we generated revenue of nearly $2.1 billion, representing 11.2% growth, of which 9.9% was organic. The balance was generated by the 3 acquisitions that we made in our fiscal '24. First quarter EBITDA margins of 10.5% represent a year-over-year increase of 110 basis points which was driven primarily by business mix and timing. Adjusted diluted earnings per share of $5.93 were 36% higher than a year ago. Greater operating income along with lower interest expense and a lower share count more than offset a higher income tax provision.

First quarter operating cash flow, excluding our accounts receivable purchase facility was $61 million, reflecting strong profitability and cash collections, partially offset by some of the working capital factors we discussed last quarter. Days sales outstanding or DSO of 47 days was a slight uptick from Q4's record low as we continue to efficiently manage working capital. Free cash flow of $49 million for the quarter was in line with our expectations.

Slide 11, please. As John discussed, subsequent to the conclusion of the first quarter, we closed on the Applied Insight acquisition, and we remain on track to close Azure Summit during the quarter, as we previously indicated. Our pro forma leverage following the completion of both transactions will be 3.2x. As we've demonstrated in the past, the healthy long-term cash flow characteristics of our business allow us to quickly delever to our target range. This means that, as always, we remain well positioned to continue deploying capital in a flexible and opportunistic manner to drive long-term growth in free cash flow per share and shareholder value.

Slide 12, please. We're pleased to be raising our fiscal '25 guidance. This increase is due to the ongoing momentum of our organic business as well as the recently completed acquisition of Applied Insight. We're raising our revenue guidance to be between $8.1 billion and $8.3 billion. $75 million of this increase is driven by the organic performance of the business, while the balance is from the inclusion of Applied Insight. This represents growth of 8.6% to 11.3% on an underlying basis. In addition, we now expect fiscal '25 EBITDA margin to be toward the upper end of the high 10s range we previously communicated, driven by the strength of the organic business, increased visibility of some of our software-defined technology sales and the inclusion of Applied Insight.

As a result of our updated revenue and EBITDA margin outlook, we're also increasing our FY '25 adjusted net income guidance accordingly to be between $515 million, $535 million with an intended increase in adjusted EPS to be between $22.89 and $23.78 per share. And finally, we're increasing our free cash flow guidance to at least $435 million due to higher organic growth as well as the income contribution of Applied Insight net of increased interest expense. Please note that additional details of our updated guidance have been included in our presentation to assist you with your modeling. Additionally, as previously mentioned, Azure Summit will be included in our guidance during our normal cadence once it has closed. We continue to work through the customary closing process and remain confident it will occur during the second quarter, most likely sooner rather than later.

Slide 13, please. Turning to forward indicators, our trailing 12 months book-to-bill ratio of 1.8x reflects strong performance in the marketplace. Our record backlog of $32.4 billion increased over 21% from a year ago and represents just under 4 years of annual revenue. These metrics provide good long-term visibility into the strength of our business. For fiscal '25, we now expect approximately 89% of our revenue to come from existing programs, with approximately 8% coming from recompetes and just over 3% from new business. Progress on these metrics reflects our successful business development and operational performance and gives increased confidence in our expectations for the year.

In terms of our pipeline, we have $4 billion of bids under evaluation, around 80% of which are for new business, CACI. We expect to submit another $13 billion in bids over the next 2 quarters with over 70% of that being for new business.

In summary, we delivered outstanding first quarter results and deployed capital in a flexible and opportunistic manner to bring additive capabilities and customer presence to CACI. We continue to win and execute high-value enduring work that supports long-term growth, increased free cash flow per share and additional shareholder value. And with that, I'll turn the call back over to John.

[John Mengucci, executive]

Thank you, Jeff. Let's go to Slide 14. Overall, this has been a great start to our fiscal year '25. We continue to successfully execute our strategy and are delivering strong performance as we ramp up large awards we've won over the past few years, along with strong on-contract growth from our existing programs. We have added to our differentiated capabilities, customer access and employee talent with our acquisition of Applied Insight. As a result, we are pleased to be in a position to raise our fiscal '25 guidance. In addition, we look forward to closing the Azure Summit acquisition shortly and welcoming them to CACI as well. We are well positioned in the right markets with the right capabilities and remain confident in our ability to drive long-term growth, increase free cash flow per share and generate additional shareholder value.

I look forward to discussing our business, our strategy and our longer-term financial outlook in more detail during our Investor Day at the New York Stock Exchange on November 8. As is always the case, our success is driven by our employees' talent, through innovation and their commitment. To everyone on the CACI team, I'm proud of what you do each day and every day for our company and our nation. And to our shareholders, I continue to thank you for your support of CACI. With that Mandeep let's open the call for questions.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] For today's session, we ask that you please limit yourself to one question and one followup. [Operator Instructions].

Our first question comes from the line of Scott Mikus with Melius Research.

[Scott Mikus, analyst]

Great numbers. John, Jeff, I wanted to ask, we saw Mynaric had some production issues with their optical communications terminals. They're supposed to be supplying a number of contractors for the Space Development Agency's Tranche 1 satellites. So I was just wondering, have any of their customers reached out to you? And could this be an opportunity to gain share either on the Trans 1 satellite? Or is this more an opportunity for Tranche 2 and beyond?

[John Mengucci, executive]

Yes, Scott, thanks. Look, in the area of [electronics], we're seeing great success with our technology and strong demand from both government and prime. I'm not going to comment on where the other vendor is at today. I will share though that we have had discussions with other primes around that topic, but I'm not going to go into too many details there. What I would say is -- and as we have been saying over the last 6 quarters, we're that optical communication terminal provider that's proven, we're deployed, operational and tested in various orbits. As we shared with many of the primes where our technology is the most mature, that's not our words. That's our customers' words and a number of our major OEM primes words.

They do come to us because we're the most mature and the lowest risk. And we're U.S. designed and manufactured. So we're still on track to do 6x to 8x number of deliveries that we did last year. I think I shared that during our guidance call. And we're still entertaining additional bid. So there's -- there's a long road ahead. It's very sizable and very profitable for us. And as obvious, Scott, we're going to keep an eye and keep an ear on where everybody else is at and have the discussions we need to make sure that the end customer is well served.

[Scott Mikus, analyst]

Okay. And then I wanted to ask about Azure Summit. It seems like you could open up a lot of new doors for CACI. So are any other products exportable and could this open up a pathway for foreign military sales for CACI?

[John Mengucci, executive]

Yes, Scott. Look, we're -- we've been talking about what our international plan is. And you should think about Azure Summit, Switchblade and other products that they deliver to be similar to everything we've shared in our software-based RF tech products. Look, they will be very applicable clearly immediately to all The Five Eyes countries that we serve today. They're also very involved in a number of platforms in the U.S. government inventory. So the path to international partnerships there, Scott, is really, how do we take our software defined tech, put it into their signal processing rack and get that kit running well and where we can provide much more capability to our U.S. customers.

And then the step forward there, of course, is how we look at The Five Eyes, NATO and Eastern European countries to not only sell our RF Tech, but also be selling Switchblade and other products. So it's what drove -- it was one of the reasons that drove the acquisition. It is some of the gaps that Azure Summit fills. And they are coming with a large number of really mission-focused top-notch engineering and technologists that really set us well both in the domestic market for expansion there and then as we slowly, but very aggressively working to the international market. Thanks, Scott.

[Operator]

Our next question comes from the line of Jan Engelbrecht with Baird.

[Jan-Frans Engelbrecht, analyst]

John, Jeff and George, congrats on a set of strong results. I just wanted to revisit some of the comments you made on the business update call with Azure Summit and just your position that you'll have on the spectral contract after that transaction closes? And any potential sort of future content that you can expand there. I was just looking at the justification documents for the Navy. And it looks like essentially the spectral line item doubles from government fiscal '25 to '29. So it looks attractive, but just wanted to get your thoughts there.

[John Mengucci, executive]

Yes, Jan, thanks. So if you look at the work [indiscernible] that Azure Summit has today, they're on C increment F. So picture that as the next stage of the below deck single suite that is on all U.S. Navy surface ships. So they are doing the next modification to that kit. That is a prime program that they won from a major prime a couple of years back as they're doing just an exquisite job beginning the production run up and the delivery. And that production run goes for the next 4 to 6 years. Spectral then gets built on top of [indiscernible]. And that's where a lot of AI and machine learning comes in. We've been able to process many more signals. And Azure is a subcontractor to us on Spectral. So if I zoomed up from those micro components, at a macro level, the next 10 years for surface ships below deck and -- it with signals intel, counter UAS, and the like, it's going to come from the combination of CACI and what is now known as Azure Summit.

We're very pleased with the work that we've done on Spectral. We just were successful in a minimally viable product demonstration and test with the United States Navy. We'll be moving into further development and then getting into the implementation, the integration and the production stage, another 12 to 18 months from now.

[Jan-Frans Engelbrecht, analyst]

Perfect. That's really helpful. And then just a quick follow-up. Is there any meaningful just changes over the next couple of quarters or maybe the next year or 2 in terms of the contract mix? I know you previously called out Azure Summit pricing mix which is probably more a fixed price versus the rest of CACI, but any large programs in backlog or new acquisitions that should close that we should think about in terms of fixed prices, the cost plus mix?

[John Mengucci, executive]

Yes, Jan, I mean, other -- other than the fact that all of our software-based technology is sold in a very similar manner to Azure is. So to the extent that their revenue comes with direct tech sales -- they are mostly some level of fixed price will come up. We did move into a kind of material phase on the EITaaS program. So if you look behind the release, you'll see where time material is a little bit higher, but that's what's driving that. Jeff, anything could you see?

[Jeffrey MacLauchlan, executive]

No, you got it. And that particularly the EITaaS T&M content will continue to ramp, we expect.

[Operator]

Our next question comes from the line of Mariana Perez Mora with Bank of America.

[Mariana Perez Mora, analyst]

Good morning, everyone. So my question is around the election. And like I think everyone is kind of like used to continuing resolution that goes into the end of the calendar year. But -- if we were to think about more noise around the election, like how are you prepared to a longer continuing resolution probably going like into next year? And how can that affect, I don't know, the awarding time or how fast some of the awards that you have recently awarded or even the pipeline of opportunities that is like really exposed to new businesses and consumer solution caps kind of like the start of those new businesses? How should we think about the impact of a longer continuing resolutions?

[John Mengucci, executive]

Mariana, this is John. Thank you. So when I hear election, I sort of think after the election and where do budgets go and the fact that defense for as long as we've been a country has always been a bipartisan efforts. So I sort of work our way through that noise and really focus on budget because that's what we're focused on. Look, I think it's safe to say that [CR] is an election year last longer than other [CRs]. I've been surprised there in the past. How it impacts our business, as I tried to share in my prepared remarks is that it can impact some of our shorter cycle purchase order-based software product awards. Now having said that, let's take a look at where our customers have gone in that regard. As we announced last quarter during our guidance call, customers that were traditionally buying our software technology on purchase orders as funding became available to put in place IDIQs where they can do larger scale larger scale, larger bulk buys of that technology that we sell on a firm fixed price manner.

A perfect example would be TLS Manpack, right? Where we're building a common software framework that allows dismounted soldiers to do the same kinds of things, signal collection and the like and all the way up to [indiscernible] But the customer has put in place buying structures where it's not concerned any new program. And those programs have quickly funded. So in the areas during my prepared remarks, where you heard me talk about we will look for additional volume or additional awards; those are not, underscore bold; impacted by where this budget goes. At a macro level, I'd like to talk about it in the manner of -- we're an $8 billion company with a $250 billion addressable market throughout the United States government, not as steep on the federal civilian area, but very, very deep in the intelligence community and the Department of Defense. So a large portion of the market we can address is very, very rich. It's more than enough to support our future growth I've said over and over, weren't deepen in during funding, funding streams and there's still a tremendous opportunity for growth.

So I don't see the budget going forward, whether it's the presence budget, whether it's a mark from either of the potential new presidents coming into the position, national security priorities are going to drop a lot of what we heard, no pun intended. And I think we'll be fine, but it could move some quarter points around. Hopefully, that gives you some additional color.

[Mariana Perez Mora, analyst]

And then a little bit on M&A. If you could discuss like how is the competitive environment, if you have any deals -- or attractive deals in the pipeline? And especially like do you think there are any areas that you'd like to be exposed like particular customers, some products that you can actually use to penetrate with your software solutions? Or like how should we think about that?

[Jeffrey MacLauchlan, executive]

Yes. John will want to add to the strategy and the capability gaps a little bit. But we continue to see a really strong pipeline. We have a lot of opportunities and robust set of opportunities that we're working on. We have mentioned for a year or so that we expected valuation multiples to contract a little bit which is consistent with our recent experience. And I'm going to say somewhat mechanically, we're committed to remaining very patient and disciplined acquirers. We have a very rigorous evaluation criteria. We've spent a lot of energy making sure we're applying our precious capital in the right places. And we continue to do so. But we see a good, rich, robust pipeline -- about particular capabilities.

[John Mengucci, executive]

Yes. I mean I think everything is going to be around SIGINT and EW. We talked about cyber and space, IT modernization. I sort of look back and look at Azure Summit sort of covering down on the SIGINT and EW and cyber area. I look at Applied Insight covering down on the IT modernization area being able to do just moving even more applications to the cloud at lightning speed at a much lower risk level. Look, anything that drives our expertise in our technology businesses, clearly, we're very focused on the technology side, but really no other changes there. And I'll footstop what Jeff mentioned, disciplined and patient are those words that we've been using over the last few years, and I know many of you have been asking when is the next M&A coming. It sort of comes when the time is right. It's not highly predictable. But rest assured, we're always out there looking. We looked at over 600 targets in the last 18 months. And we sort of called those down. We're an experienced acquisitive company. We've been doing it for 3 or 4 decades, and it works very, very well for us. So Mariana, thanks for the questions.

[Operator]

Our next question comes from the line of Tobey Sommer with Truist Securities.

[Unknown Analyst]

This is Sid, on for Tobey. I'm hoping you can provide any details maybe on what your win rate has looked like recently? And maybe if you can call out anything specifically that might be driving it a little bit different than what you've seen historically?

[John Mengucci, executive]

Yes. When we talk about win rates, we sort of get into a place where we don't like to talk about, right? But trying to provide some clarity there. Look, I'm going to start off with just how incredibly focused we are on recompete win rates. We're not a fan of losing our current book of business. We're not a fan of losing current customers. So we are -- we are very, very focused on recompete rates, and those traditionally are all greater than 90%. So we actually leak a smaller percentage of next year's growth dollars by losing our recompetes. In fact, what we do more often than not we win our recompetes at larger values on a matter -- at better rates, if that's the case. On the technology side, we find that we not only win all the book of business we have, but we traditionally bring other people's book of business well because we are performing exquisitely out there.

On the new business side, we always say that our overall win rate has to be north of 30% or 40% across everything we chase, but to be successful -- and by any measure in the last 6 to 7 years, I say we've been quite successful in driving book-to-bill ratios at one or above over the last 6 to 7 years. We're going to talk at Investor Day, frankly, around sort of the nuts and bolts of why this works and why we're different.

We have a different strategy -- we have this bid less and win more. We have focus on larger and longer duration programs. What we're looking to share with all of our shareholders is really here's what happens when we say we're in 77 markets and here's strategically how we are how we're focused, how that drives pipeline and how that drives individual captures. We'll be talking about things like Spectral, we'll talk about electronic warfare, -- we'll be talking about network modernization and sort of give you all that more detailed look at why we are successful there. And I know Jerry Parker is hungry to be giving that briefing to be able to show how we grow today, but also what's behind -- how we're going to grow into the future.

[Operator]

Our next question comes from the line of Louie DiPalma with William Blair.

[Louie Dipalma, analyst]

Was there any revenue from like 0 margin materials that contributed to the gross margin being flat year-over-year? I think last year, there was $100 million in materials revenue and the gross margin was 31%, and it was also 31% this quarter.

[Jeffrey MacLauchlan, executive]

Yes. There was a very small amount, but it was sort of at a routine level that we execute as part of larger programs, not materially. It's more broadly probably attributable to mix and some of the better margin technology areas that we talked about when we talked about the EBITDA margin more broadly.

[Louie Dipalma, analyst]

Okay. Great. And on the counter UAS side of the business, and this is more of a strategy question, but there has been a ton of innovation related to the different geopolitical conflicts on the mitigation side of counter UAS with high-powered microwaves, lasers and interceptors -- and you have traditionally been more focused on the signals intelligence side, do you feel a need to have a more end-to-end system?

[John Mengucci, executive]

Yes. Louie, thanks. So yes, we've been in the counter UAS business for a very long time. And what's equally as important as people read what's out there is we handle group 1 to group 5 and the real threats are groups 3, 4, 5. Those are really hard ones. Those are the things that -- those tactics and procedures and frequencies change every 24 hours. They are larger in nature. They can carry more payload, they're much more dangerous and those groups that have been involved in everything that you all have read and watched the news over -- so at the end of the day, the most exquisite and reliable way to check drones is in the radio frequency spectrum. Many drones are going to other methods to be able to launch and then be guided -- many are using wireless. Some are going to begin to use satellite. It sort of I need -- everybody needs a link at point or not. Even dark drones require coordinates to be loaded to them.

So I listen and I watch what's going on, and you would imagine, we're very much engaged at very, very senior levels across the federal government around what we're seeing in all of the conflicts around the globe. So having said all that, we've been in this business for about 2 decades. We understand where the state-of-the-art is going. We're not that company that's going to look at Group 1 drones that you buy for $38. That used to be a focus many years back. That's not what's delivering the most destruction around the globe, which is why we're involved at levels that we don't speak about because we can't speak about it. What rest assure when we talk about having exquisite counter UAS capabilities, that is everywhere from a large-scale system fixed site to mobile to Manpackable, which you heard about on someone else's question earlier in the call, we're that exquisite provider.

There's different business models out there. We've investigated a lot of those different business models. At the end of the day, our solutions come with a combatant commander's stamp of approval and a long list of confirmed kills. And frankly, customers out there today that are less and less needing to use a $1 million missile to defeat a $1,000 drone. So I can't comment on any specific company. We just talk about ourselves and how we go to market, but I believe we have a long-term growth path in our county US.

[Louie Dipalma, analyst]

And is there a lot more opportunities in the pipeline for counter-UAS, I think you suggested that there are more follow-on orders expected for the Manpack program. But for the Navy and you already have the Spectral, but are there other opportunities within the Navy for other large platforms for you to be involved?

[John Mengucci, executive]

Yes. I think when you look at the Azure Summit acquisition, the platforms that they're on both airborne and [indiscernible] the last thing that I'll share what makes us extremely unique and why we have other growth opportunities, not only in this year's pipeline, but you'll hear at Investor Day, a multiyear pipeline is the fact that we share a common baseline. So every time we learn something about drones and other unique signals that gets put into everybody's systems at one time. And nobody can match the speed and the power that we can deliver that, which is why we talk about speed of the flight and speed of the fleet. So yes, there's plenty of work in our pipeline out there. I would assume by -- I'm almost assured that by next quarter, you'll hear about some additional awards. But again, I think I'd better cover that in even more detail at the Investor Day coming up.

[Operator]

Our next question comes from the line of Conor Walters with Jefferies.

[Conor Walters, analyst]

I wanted to dig into your margins a little bit more. The strong performance in the first quarter. Your commentary on the second quarter, it certainly derisked the ramp through the remainder of the year, but it kind of suggests that the second half run rate could be down 10, 20 basis points year-over-year. Just curious if that's really conservatism or any other puts and takes you want to call out there?

[Jeffrey MacLauchlan, executive]

Yes. Thanks for the question. There's a condition here that we've seen in the last couple of years where our second half has been relatively flat quarter-to-quarter with higher margins than the first quarter or the first half, rather, the first and second quarter. And we see that same pattern continuing this year, although the disparity has become less pronounced. So we still have a stronger second half than first half. But the first half of the year, the second quarter that is the balance of the first half is probably somewhat flattish from where we are today and then a step up for the second half. That's helpful but not to -- hopefully, that gives you some insight.

[Conor Walters, analyst]

No, that's great. I appreciate that color. And maybe just to dig into cash. I think -- last quarter, we talked about how there was kind of an implied headwind of working capital around $100 million for the year. Just curious if that's still the latest thought process? And if you could provide any other color around how we bridge to this year versus your fiscal '24 performance?

[Jeffrey MacLauchlan, executive]

We continue to see working capital demand. I mean that's all factored in, of course, to our guide. But the changing nature of the portfolio, and if you think about some of the business that -- where we have growing volume, and this will -- you'll see this again following the Azure acquisition. And we are growing in places that require some amount of working capital for the growth, certainly, still a capital-light business by any kind of customary industrial standard. But we do have inventory and work in process in a way that the business has historically not had. So that is a factor in our cash guidance.

[Operator]

Our next question comes from the line of David Strauss with Barclays.

[Joshua Korn, analyst]

This is actually Josh Korn on for David. Just wanted to ask about the revenue guide. So we've had 3 straight quarters now of 10% or greater growth more with the materials purchases. So what, if anything, is decelerating over the balance of the year to get into the guidance range?

[John Mengucci, executive]

Yes, David, thanks. Look, when we did our original '25 guidance and as we spent a fair amount of time during this last quarter doing this updated guidance. We love to talk about guidance with the low end in a high-end scenario. Look, we contemplate a number of different scenarios, and we really try to focus on what we can control. I think we're confidently executing our strategy. So that's a check box for the right-hand goalpost. On that budget question earlier, if we look at anything of an extended CR that can delay some software-defined Tech awards, if there's any other geopolitical or macro uncertainty that sort of enters in, those are sort of left side of the goalpost markers. If we see volume pick up, if we see some additional awards during this year, which clearly we did $3.3 billion in the first quarter, then that sort of trends us truly towards the upper guide. So I remind, we're 97 days into the fiscal year. So we're at the end of the first quarter. So those are just some macrodynamics as we look at guidance.

[Jeffrey MacLauchlan, executive]

Yes, I don't think I have a lot to add to that. I think you summarized it pretty well. I mean we do think that we encompass most of the scenarios that we monitor and keep our eye on. And we're early in the year. We're encouraged by what we've seen so far here in the first quarter, it's a lot of the game left.

[Operator]

That concludes our Q&A session. I will now turn the conference back over to John Mengucci for closing remarks.

[John Mengucci, executive]

Thanks, Mandeep, and thank you for your help on today's call. I would like to thank everyone who dialed in or listen to the webcast for their participation. Really many of you will have potential follow-up questions, Jeff MacLauchlan, George Price and Jim Sullivan, are available after today's call. Please stay healthy and all my best to you and your families. This concludes our call. Thank you all, and have a great day.

[Operator]

This concludes today's conference call. You may now disconnect.